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By Dave Umhoefer December 20, 2012

Campaign to Fix the Debt says failure of fiscal talks could cost states 18 percent of their federal grant money

The Campaign to Fix the Debt, a corporate-backed bipartisan group pressing for federal debt reduction, sounded alarms as President Barack Obama and Republican House Speaker John Boehner negotiated over taxes and spending.

"Looming Fiscal Cliff Threatens to Push Wisconsin into Recession," the group declared in a Dec. 17, 2012, news release from its Wisconsin chapter. Similar releases by the group attracted media attention in Colorado, Michigan and Louisiana.

"The country is barreling in a dangerous direction and it will take a shared compromise to get it on track," the Wisconsin version of the release said, attributing the quote to former Wisconsin Gov. Tony Earl, co-chair of the Fix the Debt-Wisconsin steering committee.

The group laid out this claim to bolster its case:

"If lawmakers fail to avert the fiscal cliff, 18 percent of the federal money that is sent to the states will be eliminated. Those cuts will reduce funding for important local programs including education, housing, and low-income initiatives..."

Eighteen percent -- that’s nearly 20 cents on a dollar.

Would the automatic, across-the-board budget cuts mandated to start in early January 2013 under the Budget Control Act of 2011 take that big a bite out of federal grants to states?

In a word: No.

Here’s the background.

Fix the Debt is supported by CEOs of many major U.S. companies, and has a budget of more than $35 million raised primarily from the business world, according to stories in the Wall Street Journal, New York Times and Los Angeles Times. The group stresses that many ordinary citizens have joined the effort, which was co-founded nationally by former Republican U.S. Sen. Alan Simpson of Wyoming and Erskine Bowles, the former Clinton administration official. The pair co-chaired the Obama-created National Commission on Fiscal Responsibility and Reform. Fix the Debt has attracted a bipartisan roster of supporters from the ranks of elected officials and former officials.

The group referred in its news release to the Pew Center on the States, which issued a report on Nov. 15, 2012, "The Impact of the Fiscal Cliff on the States." That report relied on figures from the Federal Funds Information for States.

The report did use an 18 percent number in regards to federal grants to states for programs such as Title 1 education grants, special education, Head Start, nutrition for low-income women and children, and public housing.

But it was describing the pool of federal funds subject to some level of sequestration cuts.

Pew officials said they did not mean that the entire pool comprised of that 18 percent would be eliminated entirely, as Fix the Debt said.

In fact, Pew estimated that 7 percent of that pot of money would actually be eliminated, or perhaps slightly higher.

Not chump change, but a far cry from all of it.

Fix the Debt officials said they made an editing error in preparing the release, and became aware of it when we called. It will be fixed in future releases, they said.

A few final notes.

The largest federal grants, including Medicaid and major income support programs, are exempt from the automatic cuts, said Anne Stauffer and Kasia Murray of the Pew Center.

And Wisconsin is somewhat less vulnerable than other states on the impact of potential non-defense cuts, the Pew report found.

Our rating

Fix the Debt issued a news release claiming "if lawmakers fail to avert the fiscal cliff, 18 percent of the federal money that is sent to the states will be eliminated."

That’s way off. A pool of funds that size would be cut, but perhaps by 7 percent, not wiped out entirely.

We rate the group’s claim False.

Featured Fact-check

Our Sources

Fix the Debt - Wisconsin, press release, Dec. 17, 2012

Interviews with Joshua Smith and Jon Romano, Fix the Debt, Dec. 18, 2012

Interview with Anne Stauffer, project director, Fiscal Federalism Initiative and Kasia Murray, manager, Fiscal Federalism Initiative, Pew Center on the States, Dec. 18, 2012

Pew Center on the States, "The Impact of the Fiscal Cliff on the States," Nov. 15, 2012

Pew Center on the State, "The Impact of the Fiscal Cliff: Wisconsin," Nov. 15, 2012

Bipartisan Policy Center, "Everything You Ever Wanted to Know About the Sequester," updated May 2012

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More by Dave Umhoefer

Campaign to Fix the Debt says failure of fiscal talks could cost states 18 percent of their federal grant money

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